Chinese textile myths

Dale Cougot says a number of myths have grown up around the Chinese textile industry. Some of the myths and the “realities,” according to Cougot:

China is only an export machine of finished textile products. “The truth is that the local domestic consumer market is strong and growing,” he said. “Just a few years ago, 50 percent of the products made in China were consumed locally; that number is now estimated at more than 70 percent.”

Chinese industry is state-controlled and private firms are told how to buy. “In reality, most mills are private or are being privatized with estimates of only about 30 percent still state-owned. Even municipally controlled mills are acting like private firms.”

Chinese farmers only do what they are told by the government. “They are acting on price incentives like all other producers. The decision-making revolves around local seed cotton prices, international prices, input costs, government support, etc.”

Chinese industry pays “dirt cheap” wages. “This is relative; the Chinese workforce is one of the most highly educated and wages are comparable or higher than many countries and rising. In some regions, there are labor shortages for certain jobs.”

China is such a powerhouse in the textile market it has no serious competition. “Economics teaches us that trade will move to those entities who have the best comparative advantage,” says Cougot. “In this case, we have seen India and Pakistan become major yarn suppliers to the world market and to China. They both have access to lower wages and their own large local production.”